Best Buy's Online Shopping Freefall

Here is an update to a 3/30 post on web traffic. As a refresher here are February's final numbers:

Here is the latest available information on web traffic:

What is important is the 25% fall by Best Buy (BBY) since February. For a company that was supposed to be the primary beneficiary of the Circuit City implosion, at least on the web, it has not happened.

Best Buy is now essentially locked in a three way tie with Sears Holding (SHLD) and JC Penny (JCP) who have climbed in visits. If we include Sears' Kmart site, Best Buy is a distant third some with some 27% less traffic. Sears' new site may have something to do with this.

Amazon (AMZN) has regained its lead and Target (TGT) and Wal-Mart (WMT) remain numbers two and three with stable numbers.

Best Buy has been in a steady web fall for 8 weeks now. Something is happening and it is not good for Best Buy shareholders.

Disclosure: Long SHLD, WMT

Comments

[sclarksons:]

THanks for keeping us posted on this TOdd, I appreciate it.

Do you know what the picture looks like for sales?

I'm wondering if visits are translating into sales for SHLD.

Apr 07 03:14 PM

[ECONOMICS 101:]

Best Buy on-line will never reach any critical mass or scale of any meaning. Nobody buys a TV or Audio equipment on-line. They are doing it just to have a presence and report to their shareholders that "hey, we are now on-line".

Apr 07 08:33 PM

[ECONOMICS 101:]

You may buy a music CD on-line, but, that market is all but dead since ITunes came into play.

Apr 07 08:35 PM

[LuMon:]

I sell TVs at Best Buy and I had to turn away customers who were looking to replace their old TVs due to the digital transition. We had no stock. People were mad because we no TVs to sell them. I formed the idea that we had a kind of Perfect Storm scenario. Demand went up due to the digital change, manufacturers slowed production due to the financial times, at the same time we were refreshing the line up of TVs with new 09 models which did not arrive on time. I believe we lost some revenue there. Now that new TVs arrived Some TVs are double what they used to be because of the LED technology in the sets, which is crazy, but high end clients are buying them. I had a person who bought a TV because she was getting the bundle from Verizon, she never owned a TV before. So she was spending money to spend more money. Our store is meeting financial goals more often than not, specially in services and appliances. Free Delivery and Set Up with every TV over 1K also helps. We are re-structuring the management tree in every store and we are closing one hour early to save payroll. I believe all these initiatives will keep us competitive.

Apr 08 09:05 AM

[rap:]

I understand that many people believe online business in CE is limited to smaller ticket items, but I've been in the CE business for over 20 years on the national account level and this perception is quickly changing in the marketplace. for instance over 75% of all shoppers in today's market go online first before ever gracing the floors of a retail store, especially for large ticket items such as TV's or higher pr point home audio equipment. What's interesting is the demographics for the online shopper who has a net household income of well over $80k/year. These folks have money to spend and they research their purchases first. Best Buy's demise online can mainly be attributed to their lack of focus on the web as a viable outlet for sales since they have been known in the industry as the best store level merchandiser among national accounts. It is worth the effort for BBY to pursue an active web campaign to drive sales online by researching what Amazon is doing to drive sales, what catalysts Amazon is using effectively to attract buyers, what ticket items command the largest % of sales or how other retailers drive large ticket items online. I do agree that most people prefer to see, feel or experience a large ticket item such as a flat panel TV in person before committing to the final purchasing decision, however research shows the sales cycle should start online. These are valuable questions and issues to explore in fixing Best Buy's dilemma online, but it is a start and it is well worth the effort to pursue.



On Apr 07 08:33 PM Johnathan Vrozos wrote:

> Best Buy on-line will never reach any critical mass or scale of any
> meaning. Nobody buys a TV or Audio equipment on-line. They are doing
> it just to have a presence and report to their shareholders that
> "hey, we are now on-line".

Apr 08 09:08 AM

[LuMon:]

Part Time dedicated BB employee, Retired form the Armed Forces, Full time employed in non profit services.

Apr 08 09:09 AM

[billddrummer:]

LuMon,

I too work at BBY and our store has met or exceeded its financial objectives so far this year.

I work in appliances, and most of my customers do research on-line, but want to see the product on display before purchasing.

I think what would be more interesting is to see what the conversion factor for online visits is. When you compare SHLD with BBY, you're comparing a full-line retailer to a specialty retailer, which isn't a valid comparison in my view. If you're shopping for hardware or clothes, you're not going to visit the BBY site.

I believe most of the CC traffic that existed has moved to Amazon and eBay. The customers I get that used to shop at CC are typically price-conscious and less interested in talking with skilled salespeople than in getting the best deal.

Apr 08 11:32 AM

[Joe Public:]

Maybe people accellerated purchases they would have made this spring into January & February due to Circuit City AND due to the February DTV transition? Now that CC is closed, and DTV is put off until June, maybe there's a lull? I don't know, I'm just speculating.

Apr 08 04:06 PM

[billddrummer:]

Another thing that boosted January and February spending was early tax refunds that were distributed beginning mid-January.

Many of my customers shopped while waiting for their refunds, then purchased after they received them.

The impact of that extra cash injection translated into higher retail sales during January and February, when virtually everyone expected further declines.

I believe the baseline spending patterns will revert to trend (lower) after tax season.

Apr 09 03:28 PM